According to a new report recently released by Forbes, many people make a common estate planning mistake without realizing it. What is this mistake? Simply failing to update the beneficiary designations on your accounts. Unfortunately, this type of mistake could have undesirable consequences. Once you pass away, these mistakes often cannot be undone.
When beneficiary designations are not kept up to date, the assets may end up transferring to a person that you no longer with to receive your property. This could include a former spouse, friend, or family member who no longer needs the asset. While you likely completed the beneficiary designation paperwork when first opening the account, few people are diligent about keeping these designations up to date.
Why is it so important to update your beneficiary designations? The Forbes report highlights the following six reasons:
- Following a divorce or remarriage, you likely do not want your former spouse to receive your assets upon your death.
- If your primary beneficiary has passed away, you will need to name a new beneficiary in order to prevent the asset from passing to your estate. Assets that pass to your estate could result in negative tax and probate administration consequences.
- If your financial institution changed ownership, they may have dropped the old beneficiary designations for your accounts.
- If you had additional children or grandchildren, the new family member will not automatically receive any interest in the asset unless the designations are updated.
- If you changed jobs and rolled over your retirement plan, your beneficiaries may lose any claim to those assets unless you ensure that beneficiaries are named to the new account.
- If your beneficiary becomes disabled, you will need to amend the designation in order to prevent any harm to the beneficiary’s eligibility for Social Security benefits.
To learn more about modifying your estate plan to prevent these and other common mistakes, contact our office today at (714) 282-7488.